Jens Weidmannhttp://www.businessinsider.com/category/jens-weidmann
en-usFri, 09 Dec 2016 23:14:30 -0500Fri, 09 Dec 2016 23:14:30 -0500The latest news on Jens Weidmann from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/jens-weidmann-warns-city-of-london-could-lose-financial-passport-after-brexit-2016-9It's looking more likely than ever that the UK will lose its financial passporthttp://www.businessinsider.com/jens-weidmann-warns-city-of-london-could-lose-financial-passport-after-brexit-2016-9
Mon, 19 Sep 2016 02:50:40 -0400Ben Moshinsky
<p><img style="float:right;" src="http://static3.businessinsider.com/image/55141177dd089537208b45d2-2400/jens-weidmann-2.jpg" alt="Jens Weidmann" data-mce-source="REUTERS/Brian Snyder " data-mce-caption="Jens Weidmann, president of the German Bundesbank and a member of the European Central Bank (ECB) Governing Council." data-link="http://pictures.reuters.com/" /></p><p>The European Union won't cut a special deal with the City of London if the UK leaves the European single market, Germany's top central banker warned.</p>
<p>Jens Weidmann, president of the Bundesbank, told the Guardian that London-based banks would lose their right to operate in the 27-nation trading bloc in the event of a so-called hard Brexit.</p>
<p>This scenario&nbsp;would see the UK leave the EU without negotiating any&nbsp;form of membership of the single market &ndash; the economic trading bloc that forms the core of the EU.</p>
<p><a href="https://www.theguardian.com/world/2016/sep/18/hard-brexit-will-cost-city-of-london-its-hub-status-warns-bundesbank-boss">Weidmann told The Guardian</a> that &ldquo;passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area.&rdquo;</p>
<p>Membership requires that countries harmonize their financial rules, that they accept the free movement of European citizens, and that they pay into a central budget &ndash; conditions which are&nbsp;unlikely to be accepted by Eurosceptics.</p>
<p>Current EU law allows European banks to operate branches in the UK that do not need to be separately capitalised from the parent company abroad. Similarly, non-EU banks, such as those from the US or Asia, can use their London subsidiary to sell services to clients across the EU. This has allowed London's financial centre to act as a hub for global&nbsp;firms looking to do business in the EU.</p>
<p>The use of this bank "passport," which allows banks in London to access the EU single market of 28 nations (including the UK), could come to an end because of the June vote for a British exit from the EU, or Brexit.</p>
<p>Other financial centres in the EU, such as Dublin, Frankfurt or Paris, could take over London's hub role if the UK loses its passport.</p>
<p>&ldquo;Of course several businesses will reconsider the location of their headquarters. As a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers. But I don&rsquo;t expect a mass exodus from London to Frankfurt,&rdquo; Weidmann said.</p><p><a href="http://www.businessinsider.com/jens-weidmann-warns-city-of-london-could-lose-financial-passport-after-brexit-2016-9#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/martin-shkreli-twitter-students-recreate-daraprim-drug-2016-12">Martin Shkreli goes on a raging tweetstorm in response to high school students recreating his $750 drug for $2</a></p> http://www.businessinsider.com/ecb-dove-hawk-scale-2015-2Here's a ranking of the European Central Bank's hawks and doveshttp://www.businessinsider.com/ecb-dove-hawk-scale-2015-2
Tue, 10 Feb 2015 12:39:40 -0500Mike Bird
<p><img style="float:right;" src="http://static3.businessinsider.com/image/54da4267dd08956a4d8b4613-1000-750/doves-and-hawkes-43.jpg" border="0" alt="Doves and Hawkes 4*3"></p><p>There are 25 people who sit on the <a href="https://www.ecb.europa.eu/ecb/orga/decisions/govc/html/index.en.html">European Central Bank's governing council</a>.&nbsp;The big players, like ECB President Mario Draghi and Bundesbank chief Jens Weidmann, are well-known. But there are dozens of other council members whose views have a huge impact on the central bank's decisions.&nbsp;</p>
<p>We've judged each member's importance on a scale of 1-5 (based on things such as the size of the country they represent and whether they sit on&nbsp;<span style="color: #000000;">the executive board)&nbsp;</span><span style="line-height: 1.5em;">and presented them in order from the most hawkish to the most dovish. </span><a href="http://www.ntmarkets.com/wp-content/uploads/2015/01/ITC-Hawk-Dove-Cheat-Sheet-January-2015-3.pdf">ITC Markets</a><span style="line-height: 1.5em;"> and </span><a href="http://ftalphaville.ft.com/2013/12/02/1709942/your-ecb-fewer-hawks-more-doves/">Credit Suisse</a><span style="line-height: 1.5em;">&nbsp;produced similar rankings in the past.</span></p>
<p><strong>Doves are typically members who&nbsp;often want more monetary easing&nbsp;from the central bank.</strong> They're usually the first in favour of interest rate cuts and more positive about the beneficial potential of quantitative easing (QE), which means buying up government bonds to try and boost the economy.</p>
<p><strong>Hawks are the opposite.</strong> They're more sceptical of QE and typically favour higher interest rates and often express concerns about financial instability caused by easy money. These are the policymakers who typically focus on supply-side remedies to make economies more competitive, and are more critical of the impact of loose monetary policy.</p><h3>HAWK: Jens Weidmann — Bundesbank</h3>
<img src="http://static3.businessinsider.com/image/54da4267dd08956a4d8b4615-400-300/hawk-jens-weidmann--bundesbank.jpg" alt="" />
<p><p><strong>Importance: 5/5</strong></p>
<p>This will hardly surprise anyone who watches the ECB. Weidmann is Europe's most hawkish prominent monetary policy maker.&nbsp;</p>
<p>Here are <a href="https://www.bis.org/author/jens_weidmann.htm">some of his recent comments</a>:</p>
<p>On the ECB's QE: "<a href="http://uk.businessinsider.com/afp-german-central-bank-chief-sceptical-of-ecb-stimulus-move-2015-1">I regard this decision with scepticism</a>"</p>
<p>On QE again:</p>
<p style="padding-left: 30px;"><span style="line-height: 1.5em;">I thought that there was no urgent need for this measure - not least because government bond purchases are not a monetary policy instrument like our policy rates, for instance.</span></p>
<p style="padding-left: 30px;"><span>Central banks are not magicians. And they have no wand to make all our wishes come true. In particular, it is fanciful to believe that monetary policy tools can sustainably lift the growth potential of an economy or permanently create new jobs. These goals can only be achieved through structural reforms.</span></p>
<p><span>As the representative of Europe's largest economy, Weidmann has an over-sized impact, and he's among the most influential members of the governing council.</span></p></p>
<br/><br/><h3>HAWK: Yves Mersch — ECB Executive Board</h3>
<img src="http://static6.businessinsider.com/image/54da4267dd08956a4d8b4616-400-300/hawk-yves-mersch--ecb-executive-board.jpg" alt="" />
<p><p><strong>Importance: 4/5</strong></p>
<p>In 2013, Mersch expressed "<a href="http://www.ecb.europa.eu/press/key/date/2013/html/sp130613_1.en.html">considerable uncertainty</a>" over negative deposit rates (which were eventually brought in) and added that "<span>a low-interest-rate environment may in principle spur an underpricing of certain risks, support the emergence of asset price bubbles, or provide incentives to delay certain adjustments in bank balance sheets with the risk of zombie-banking."</span></p>
<p>He was <a href="&quot;To%20define%20portfolios%20of%20government%20bonds%20of%20euro%20zone%20member%20states%20and%20then%20to%20buy%20them%20would%20pose%20immense%20economic,%20legal%20and%20political%20challenges%20for%20the%20ECB,&quot;%20said%20Mersch.">very negative about QE back in 2013</a>, and hadn't much changed his views by the end of 2014. According to CNBC, in November here's what he said:</p>
<p style="padding-left: 30px;">"Easing of monetary policy cannot work effectively when the European economy is structurally not in good shape," Mersch said in a speech at an annual banking conference in Frankfurt.</p>
<p style="padding-left: 30px;">"I would feel a lot better if those politically responsible clearly committed to lowering the risk for the ECB," he said, referring to commitments for lower sovereign debt, closer fiscal and economic integration and structural reforms.</p>
<p>Even though he's on the executive board, Mersch is quite a forthright hawk.</p></p>
<br/><br/><h3>HAWK: Klaas Knot — Netherlands Bank</h3>
<img src="http://static2.businessinsider.com/image/54da4267dd08956a4d8b4617-400-300/hawk-klaas-knot--netherlands-bank.jpg" alt="" />
<p><p><strong>Importance: 4/5</strong></p>
<p>Klaas Knot is a monetary economist, he's worked at the IMF and the Dutch finance ministry, and he's definitely on the very hawkish end of the ECB spectrum.&nbsp;</p>
<p>Knot said he would only support QE if national central banks took their own risk, <a href="http://blogs.wsj.com/economics/2015/01/16/european-central-banks-knot-supports-qe-if-national-banks-buy-countrys-bonds/">which is seen by some economists as something that weakens the scheme</a>.&nbsp;</p>
<p><a href="http://www.bloomberg.com/news/articles/2011-11-10/ecb-s-knot-says-central-bank-can-t-do-much-more-to-resolve-debt-crisis">He said there wasn't much more the ECB could do</a> (in 2011!) and raised fears that <a href="http://www.bloomberg.com/news/articles/2014-10-07/ecb-stimulus-raises-risk-of-bubbles-dutch-central-bank-says">loose monetary policy would create financial bubbles</a>&nbsp;as recently as October.</p>
<p>He's not as vocal or powerful as Weidmann, but no doubt: He's a solid hawk.&nbsp;</p></p>
<br/><br/><a href="http://www.businessinsider.com/ecb-dove-hawk-scale-2015-2#hawkish-erkki-liikanen--bank-of-finland-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/german-bundesbank-president-jens-weidmann-warns-about-qe-2014-11Germany Doesn't Seem To Care That Europe Is On The Brink Of A Continent-Wide Recessionhttp://www.businessinsider.com/german-bundesbank-president-jens-weidmann-warns-about-qe-2014-11
Mon, 17 Nov 2014 06:21:00 -0500Mike Bird
<p><img style="float:right;" src="http://static5.businessinsider.com/image/5469da44dd0895fa0e8b4585-1200-924/jens-weidmann.jpg" alt="Jens Weidmann" border="0"></p><p>Bundesbank boss Jens Weidmann, the man most closely associated with Germany's opposition to easier monetary policy, is slamming the brakes on expectations that the European Central Bank will finally go for quantitative easing (QE).&nbsp;</p>
<p>The European economy is slowing down, and there is a danger of both a new recession and deflation across the continent. The ECB has already made money as cheap as possible for investors to borrow by holding interest rates down close to zero. QE would be the next step — a programme in which the ECB buys various assets from banks largely to inject new cash into the system.</p>
<p>Germany, once the economic powerhouse of the continent, <a href="http://uk.businessinsider.com/germany-japanification-stagnation-eurozone-2014-11?r=US">is itself teetering on the brink of contraction</a> — and yet the Germans don't seem to want to do anything about it. <a href="http://uk.businessinsider.com/cms/posts/edit?id=5469d568833c9e3b757e366e">Weidmann, speaking to Handelsblatt, a German business newspaper</a>, said the Germans would prefer to be debt-free:</p>
<blockquote class="blockquote">
<p><span style="line-height: 1.5em;">"</span><span style="line-height: 1.5em;">Such purchases might create new incentives to run up debt, besides adding to the reform fatigue in a number of countries," he cautioned.&nbsp;</span><span style="line-height: 1.5em;">Nor was there any guarantee that quantitative easing would indeed have the intended impact on the economy, Weidmann pointed out.</span></p>
</blockquote>
<p><span style="line-height: 1.5em;">He added that Germany shouldn't offer Europe a stimulatory boost with fiscal policy — i.e. government spending — either. <span style="line-height: 1.5em;"><a href="http://uk.businessinsider.com/germany-japanification-stagnation-eurozone-2014-11?r=US">Germany could easily boost its government spending and stay within the reasonable debt cap of 3% of GDP</a>. But that ain't happening:</span></span></p>
<blockquote class="blockquote">
<p><span style="line-height: 1.5em;"><span>Calls for Germany to increase its investment to help its partners amounted to nothing more than a plea for a common fiscal policy, he asserted. For another thing, Weidmann pointed out, such expenditure would do little to help countries on Europe's periphery.</span></span></p>
</blockquote>
<p><span style="line-height: 1.5em;">ECB president Mario Draghi has hinted that the ECB&nbsp;<em>will&nbsp;</em>go for QE. BNP Paribas, Deutsche Bank, and Bank of America expect that the purchases of government debt will start in 2015. </span></p>
<p><span style="line-height: 1.5em;">Draghi's continued insistence that <a href="http://uk.businessinsider.com/ecb-rates-decision-november-2014-11?r=US">the ECB will add about €1 trillion</a>&nbsp;($1.25 trillion)&nbsp;to its balance sheet would probably need full QE. The bank is already buying some bonds and securities, but the markets in those assets are probably too small to reach such a big goal.&nbsp;</span><span style="line-height: 1.5em;"><br></span></p>
<p><span style="line-height: 1.5em;">The ECB could push for QE without Weidmann, but it's previously been keen to get unanimous decisions, so as not to alienate big European economies like Germany. These sort of comments might make some analysts rethink the likelihood of QE for Europe.&nbsp;</span></p><p><a href="http://www.businessinsider.com/german-bundesbank-president-jens-weidmann-warns-about-qe-2014-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/ecb-rates-decision-november-2014-11The Euro Just Hit A 2-Year Low After Mario Draghi Confirmed The ECB's Stimulus Goalshttp://www.businessinsider.com/ecb-rates-decision-november-2014-11
Thu, 06 Nov 2014 08:54:00 -0500Mike Bird
<p><img style="float:right;" src="http://static6.businessinsider.com/image/545b66ffdd0895cf4e8b45ab-1200-924/mario-draghi-7.jpg" alt="Mario Draghi" border="0"></p><p></p>
<p><span style="line-height: 1.5em;">The European Central Bank's latest meeting concluded Thursday, </span><a href="http://www.ecb.europa.eu/press/pr/date/2014/html/pr141106.en.html">with no change in interest rates</a><span style="line-height: 1.5em;">.</span></p>
<p><span style="line-height: 1.5em;">Mario Draghijust gave an introductory statement and took questions from journalists. <a href="http://www.ecb.europa.eu/press/tvservices/webcast/html/webcast_141106.en.html">Here's the link for the video</a>.</span></p>
<p><span style="line-height: 1.5em;">Here are the major points:</span></p>
<ul>
<li>Draghi's language about raising the ECB's balance sheet back to 2012 levels is still in place. That's roughly dovish: we now know that s<a href="http://www.businessinsider.com/r-exclusive-central-bankers-to-challenge-draghi-on-ecb-leadership-style-2014-11">ome other senior ECB figures weren't happy</a> when he made that goal public.</li>
<li>The fact that the balance sheet goal is in <a href="http://www.ecb.europa.eu/press/pressconf/2014/html/is141106.en.html">Draghi's introductory statement</a> means it's been signed off by the governing council, suggesting everyone is more on board was previously thought.&nbsp;</li>
<li>Draghi just confirmed that the "2012 levels" for the balance sheet means March 2012, when the balance sheet sat at about €3 trillion,&nbsp;<span>and implying a €1 trillion increase from now. He's added some concrete detail to the goal, which was previously pretty flimsy.</span></li>
<li>He also says officials are unanimous in pushing for more stimulus if it's needed.&nbsp;</li>
<li>Staff at the ECB have been asked to prepare for further easing.</li>
<li>The euro is falling, down by 0.62%. It's dipping below $1.24 for the first time since 2012.</li>
</ul>
<p><img src="http://static1.businessinsider.com/image/545b7ce1dd0895a54d8b45c7-1096-399/screen shot 2014-11-06 at 1.50.39 pm.png" alt="EURUSD" border="0"></p>
<ul>
<li>Draghi made some mixed points about QE, when asked what the ECB had learned from other central banks. He said it was normal for policymakers to disagree.&nbsp;</li>
<li>"There is no drawing line between north and south. There is no coalition" - Draghi now talking openly about rumours of a regional split on whether to ease further.</li>
<li>When asked what potential tools the ECB could use, Draghi said "if it's not monetary financing (directly buying bonds from governments), it's in our mandate." That's leaving a lot of room for action.</li>
</ul>
<p>In September,<a href="http://www.businessinsider.com/mario-draghi-press-conference-september-4-2014-9"> the ECB announced a bundle of new policies</a>, including purchases of covered bonds (which have barely started), so most&nbsp;<span>analysts were not expecting any big decisions at this meeting. They&nbsp;<span>anticipated that the</span><span>&nbsp;bank would leave its benchmark interest rate at 0.05%.&nbsp;</span></span></p>
<p><span>Meanwhile, there have been several leaks from the ECB in the last month (see <a href="http://uk.businessinsider.com/new-york-times-leaked-ecb-documents-2014-10">here</a> and <a href="http://www.businessinsider.com/r-exclusive-central-bankers-to-challenge-draghi-on-ecb-leadership-style-2014-11">here</a>), suggesting that personal relationships between Draghi and the other national governors, particularly Germany's Jens Weidmann, have deteriorated.&nbsp;</span><span style="font-size: 15px; line-height: 1.5em;"><br></span></p>
<p>And while we're waiting,&nbsp;<a href="http://www.businessinsider.com/facts-about-ecb-meeting-novemeber-2014-11">here's all the important news that's broken</a> about European economic conditions and the inside workings of the ECB since the last time the governing council met.&nbsp;</p><p><a href="http://www.businessinsider.com/ecb-rates-decision-november-2014-11#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/secret-documents-detailing-the-huge-division-in-the-ecb-during-europes-crisis-just-got-leaked-2014-10The ECB Just Suffered A Stunning Leakhttp://www.businessinsider.com/secret-documents-detailing-the-huge-division-in-the-ecb-during-europes-crisis-just-got-leaked-2014-10
Fri, 17 Oct 2014 08:06:00 -0400Mike Bird
<p><img style="float:right;" src="http://static4.businessinsider.com/image/538f50c06bb3f74f64722538-1200-924/mario-draghi-34.jpg" border="0" alt="Mario Draghi"></p><p>The New York Times <a href="http://dealbook.nytimes.com/2014/10/17/before-a-bailout-doubts-over-keeping-a-cyprus-bank-afloat/?smid=tw-share">has acquired several months worth of European Central Bank minutes</a>, running between May 2012 and January 2013.&nbsp;</p>
<p>The ECB is notoriously secretive, and unlike the Federal Reserve, Bank of Japan, and Bank of England, releases no immediate minutes from its governing council minutes — it waits for 30 years. Because the eurozone hasn't existed that long, none have yet been released.</p>
<p>But The Times just got its hands on some, and the details show the massive split at the heart of the ECB during the financial crisis in Cyprus. German policymaker Jens Weidmann was calling privately for ECB assistance to at least one of Cyprus' struggling banks to be curtailed:</p>
<blockquote class="blockquote">
<p class="story-body-text">Fearing possible contagion if the bank failed, the ECB’s governing council, a decision-making arm consisting of 24 members, had approved an emergency loan request by one its members, the Central Bank of Cyprus, in late 2011.</p>
<p class="story-body-text">As 2013 approached, the short-term loans to Cyprus Popular Bank had grown to €9 billion, about two thirds the size of the Cypriot economy, and Jens Weidmann, the hawkish head of the German Bundesbank, had begun to forcefully argue that this exposure was too large, according to the minutes of governing council meetings.</p>
<p class="story-body-text">By approving the loans — which were disbursed by the central bank of Cyprus — Weidmann said that the ECB was violating a core tenet. That rule holds that banks on the verge of failure should not be bailed out with additional loans.</p>
</blockquote>
<p class="story-body-text">This won't be entirely surprising to ECB watchers, who are aware that Weidmann is much more hawkish than other members. But it does put clearly what he was saying for the first time.</p>
<p class="story-body-text">If the New York Times has a full series of minutes from May 2012, it <a href="http://www.businessinsider.com/the-amazing-power-of-a-few-words-from-mario-draghi-2012-10">would also cover president Mario Draghi's "whatever it takes" speech</a>&nbsp;and show any major splits there. The eurozone's policymakers and governments are already strained by the bloc's terrible economic performance, and these revelations could make relations even worse.</p>
<p class="story-body-text"><strong>The ECB has responded to the claims with a statement.&nbsp;</strong>It says the council <a href="http://www.ecb.europa.eu/press/pr/date/2014/html/pr141017_1.en.html">was in full agreement that it needed confirmation that the Cypriot bank was solvent</a>:&nbsp;</p>
<blockquote class="blockquote">In this specific case there was full consensus in the Governing Council on the need to get assurances from the Central Bank of Cyprus that this bank was solvent. This was confirmed explicitly by the Central Bank of Cyprus, which also confirmed the proper valuation of collateral after an intense dialogue between it and the ECB.</blockquote><p><a href="http://www.businessinsider.com/secret-documents-detailing-the-huge-division-in-the-ecb-during-europes-crisis-just-got-leaked-2014-10#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/weidmann-downplays-ecb-rate-cut-hopes-2013-4Euro Surging After New Comments From Jens Weidmannhttp://www.businessinsider.com/weidmann-downplays-ecb-rate-cut-hopes-2013-4
Fri, 19 Apr 2013 09:41:00 -0400Matthew Boesler
<p>Wow!</p>
<p>Just Wednesday, German Bundesbank President and ECB Governing Council Member Jens Weidmann was <a href="http://www.businessinsider.com/the-euro-is-diving-2013-4">saying that an ECB interest rate cut would be appropriate</a> if new economic data warranted such action on the part of the central bank.</p>
<p>That, of course, made the euro go down.</p>
<p>This morning, at a speech in Washington, Weidmann says interest rates are "currently appropriate," and not to "expect too much" from a rate cut, as central banks can't solve structural problems.</p>
<p>Weidmann did say, however, that the ECB may reassess interest rates if the data change.</p>
<p>Below is a chart of the euro, which jumped to a high of 1.3127 against the U.S. dollar on the Weidmann comments but is now walking back some of those gains.</p>
<p>Earlier, the euro jumped on <a href="http://www.businessinsider.com/schauble-ecb-should-reduce-liquidity-2013-4">comments from German finance minister Wolfgang Sch&auml;uble</a> that the ECB should reduce liquidity in the euro area, but subsequently erased all its gains before the Weidmann comments hit the tape.</p>
<p><img src="http://static2.businessinsider.com/image/51714894eab8ead25800000c-620-/screen%20shot%202013-04-19%20at%209.36.18%20am.png" border="0" alt="gold" width="620" /></p><p><a href="http://www.businessinsider.com/weidmann-downplays-ecb-rate-cut-hopes-2013-4#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/european-market-update-february-15-2013-2Markets Aren't Doing Much In Europehttp://www.businessinsider.com/european-market-update-february-15-2013-2
Fri, 15 Feb 2013 04:21:00 -0500Sam Ro
<p><img style="float:right;" src="http://static5.businessinsider.com/image/511dfdd169bedd5a35000018-350-/greek-girl-cat.jpg" border="0" alt="greek girl cat" width="350" /></p><p>Most markets are down a bit early in the European trading session.</p>
<p>England's FTSE 100 is down 0.1%.</p>
<p>France's CAC 40 is flat.</p>
<p>Germany's DAX is down 0.2%.</p>
<p>Spain's IBEX is down 0.5%.</p>
<p>Italy's FTSE MIB is up 0.1%.</p>
<p>G20 leaders are meeting in Russia.&nbsp; The hot topic is currency wars, or the risk that global central banks will compete to devalue their currencies.</p>
<p>&ldquo;I don&rsquo;t think that Mario Draghi was trying to talk the euro up or down,&rdquo; said ECB member <a href="http://www.bloomberg.com/news/2013-02-15/weidmann-says-ecb-won-t-cut-interest-rates-to-weaken-euro.html">Jens Weidmann to Bloomberg</a>.&nbsp; He believes that the ECB &ldquo;will abstain from manipulating or directly targeting the exchange rate.&rdquo;</p>
<p><a href="european-market-update-february-15-2013-2"><em>Click Here For Updates &gt;</em></a></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/the-eurozones-youth-unemployment-crisis-2013-2" >Europe's Youth Unemployment Nightmare In 18 Charts ></a></strong></p>
<p><a href="http://www.businessinsider.com/european-market-update-february-15-2013-2#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bundesbank-chief-warns-of-threat-to-central-bank-independence-2013-1German Central Bank Chief Slams 'Disturbing Abuses' Of Monetary Policy In Japanhttp://www.businessinsider.com/bundesbank-chief-warns-of-threat-to-central-bank-independence-2013-1
Tue, 22 Jan 2013 04:45:29 -0500Agence France Presse
<p>Bundesbank chief Jens Weidmann expressed concern Monday about threats to the independence of central banks, particularly in Japan and Hungary, which he warned could sharply politicise exchange rate policy.</p>
<p>"We are witnessing disturbing abuses, for example in Hungary or in Japan, where the new government is interfering massively in the affairs of the central bank, calling forcefully for a more aggressive monetary policy," Weidmann said at a new year reception at the Frankfurt stock exchange's operator, Deutsche Boerse.</p>
<p>Central banks of major industrialised countries were granted independence from government control in the 1970s and 1980s in order to break double-digit inflation.</p>
<p>The German central bank is traditionally a hawk against inflation risks, but Weidmann also warned an unintended consequence of governments dictating monetary policy "could be a much stronger politicising of exchange rates."</p>
<p>"Up to now the international monetary system has weathered the crisis and avoided a devaluation race and I hope very much that will remain the case," he added.</p>
<p>The monetary easing policies undertaken by the central banks of numerous industrialised countries during the crisis, primarily aimed at unfreezing financial markets, have also tended to lower the value of their currencies.</p>
<p>While a number of emerging nations such as Brazil were unhappy and spoke of "currency wars", independent central banks have not engaged in devaluations to improve the competitiveness of their nations' exports.</p>
<p>The Bank of Japan was due to conclude Tuesday its first policy meeting since Prime Minister Shinzo Abe took office with a pledge to pressure it into aggressive monetary easing to revive the long-suffering economy.</p>
<p>The two-day meeting is widely expected to see the central bank launch another round of easing, and bow to government demands that it set a two-percent inflation target in a bid to vanquish the deflation that has haunted the world's third largest economy for years.</p>
<p>Abe has not hidden he aims to appoint a replacement to the current head of the central bank, whose term ends soon, that shares his government's views.</p>
<p>His comments have led to a significant weakening of the yen in recent weeks, a boon to Japanese exporters.</p>
<p>In Hungary, conservative Prime Minister Viktor Orban will also soon have the opportunity to appoint a new central bank head, and is widely expected to appoint one of his loyal allies.</p>
<p>Last year he packed MNB's monetary policy committee with his supporters, which have outvoted the independent members to push through cuts in interest rates despite rising inflation, which at 5.7 percent in 2012 was the highest in the European Union.</p>
<p>The EU and International Monetary Fund have expressed concern about the loss of central bank independence in Hungary and have not moved forward with providing Budapest with a 15-billion-euro ($20 billion) precautionary credit line.</p>
<div class="nc_footer">
<p>Copyright (2013) AFP. All rights reserved.</p>
</div>
<p><img class="nc_pixel" src="http://pixel.newscred.com-1-1/px.gif?key=YXJ0aWNsZT03NjQzYTNhNmIxMDc4MTJlYzNkZDgxZDA2MzliNjY0NiZvd25lcj0xYjhjMzM1YzkwMmFjNGFiMTI4ZWU4ZWQ3NzNiZWUwNCZub25jZT1iMjNjZTIzNS1iZDEzLTQ4Y2YtYTIwNC05MmQ1MmQ4MzdiZDgmcHVibGlzaGVyPThjMDBmYmVlNjFkNWJjZjBjNjA5MmQ4YjkyZWJiY2Ex" border="0" alt="" width="1" height="1" /></p><p><a href="http://www.businessinsider.com/bundesbank-chief-warns-of-threat-to-central-bank-independence-2013-1#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/mario-draghis-crucial-mistake-2012-9In His Plot To Save Europe, Mario Draghi Made One Crucial Mistakehttp://www.businessinsider.com/mario-draghis-crucial-mistake-2012-9
Tue, 25 Sep 2012 08:27:00 -0400Matthew Boesler
<p><img style="float:right;" src="http://static6.businessinsider.com/image/5061a298ecad04b94d000003-400-300/mario-draghi.png" border="0" alt="Mario Draghi" width="400" height="300" /></p><p><a href="http://www.businessinsider.com/blackboard/reuters" class="hidden_link">Reuters</a> has <a href="http://uk.reuters.com/article/2012/09/25/uk-ecb-draghi-plan-idUKBRE88O09820120925">a fascinating special report that takes a look inside the internal negotiations on the ECB Governing Council</a> that led to the birth of Mario Draghi's OMT bond-buying plan to save the euro, announced on September 6.</p>
<p>The piece details the negotiations between the Italian ECB chief Mario Draghi and his opponent on the council, Jens Weidmann &ndash; the hawkish head of the German Bundesbank.</p>
<p>Weidmann has been staunchly opposed to bond-buying, given Germany's tumultuous monetary history, so Draghi needed to isolate him on the council following the ECB chief's pronouncement in late July that the ECB would do "whatever it takes" to save the euro.</p>
<p>And Draghi almost pulled off his plan perfectly. After all, he ended up getting his bond-buying program.</p>
<p>However, as Reuters correspondents&nbsp;<span>Paul Carrel, Noah Barkin, and Annika Breidthardt point out in their report, Draghi made one crucial mistake:</span></p>
<p style="padding-left: 30px;">On August 2, as the council put the finishing touches on the statement Draghi would deliver at an afternoon news conference, Weidmann made a special request. He wanted the ECB president to make clear to reporters that support for bond-buying had not been unanimous. Draghi agreed.</p>
<p style="padding-left: 30px;">A few hours later, Draghi told reporters in Frankfurt and investors watching screens around the globe that the ECB could soon begin buying bonds to reduce borrowing costs in countries like Spain and&nbsp;<a href="http://uk.reuters.com/places/italy" title="Full coverage of Italy">Italy</a>. But his lack of specifics disappointed markets. <span style="color: #ff0000;"><strong>And he made one crucial mistake. Instead of sticking to past practice and remaining vague about who had dissented, he named Weidmann as the lone rebel, infuriating officials at the Bundesbank and on the ECB council who sympathised with the German, according to several sources.</strong></span></p>
<p style="padding-left: 30px;">"It wasn't right for him to single out Weidmann," the senior ECB official said.</p>
<p style="padding-left: 30px;"><strong>In the following weeks, a stung Bundesbank would work overtime to undermine Draghi and his plans through a combination of public statements and aggressive leaks.</strong></p>
<p>But Draghi was able to pull it off on September 6, and the OMT has been unveiled and has served to calm markets, so what's the big deal?</p>
<p><span>Carrel, Barkin, and Breidthardt explain the ultimate consequences of Draghi's crucial mistake: <strong>the strong conditionality attached to the OMT program that has caused many on Wall Street to trash the plan.</strong></span></p>
<p>More from the report:</p>
<p style="padding-left: 30px;">At the September 6 policy meeting, all members of the Governing Council bar Weidmann backed the plan to buy sovereign bonds on secondary markets.</p>
<p style="padding-left: 30px;"><strong>But Weidmann's stance and the manoeuvring of others sympathetic to his cause ensured any ECB intervention would come with a strong dose of "conditionality".</strong></p>
<p style="padding-left: 30px;">Countries who wanted the ECB to intervene must first sign up to a formal aid programme. IMF involvement would be sought and bond purchases restricted to maturities of up to 3 years. The ECB could choose to sell as well as buy bonds - a veiled warning to countries that it might pull the plug if they failed to deliver on their promises.</p>
<p>The conditionality is a big problem because, for example, it could deter countries like Spain where leaders already face voter angst over unpopular austerity measures to sign up for the ECB's rescue plan, rendering it useless.</p>
<p><a href="http://www.businessinsider.com/blackboard/morgan-stanley" class="hidden_link">Morgan Stanley</a> rates strategist Laurence Mutkin said the plan was "quite likely" to deepen Europe's recession <a href="http://www.businessinsider.com/morgan-stanley-the-ecbs-new-plan-is-quite-likely-to-deepen-europes-recession-2012-9">because it was like asking countries like Spain and Italy "<span>to sign up for a plan that mandates a 'fiscal cliff'."</span></a></p>
<p><span>Nomura economist&nbsp;<span>Jacques Cailloux said&nbsp;that <a href="http://www.businessinsider.com/nomuras-incredibly-bearish-take-on-why-the-ecb-only-bought-3-months-at-most-2012-9">"t<span>ough negotiations around the conditionality are likely to destabilise markets further."</span></a></span></span></p>
<p><span><span>And, pointing to the biggest negative of the plan, <a href="http://www.businessinsider.com/bofa-ecb-not-about-to-buy-bonds-2012-9">BofA economist Laurence Boone wrote that "e</a><span><a href="http://www.businessinsider.com/bofa-ecb-not-about-to-buy-bonds-2012-9">mphasis on conditionality [is] even stronger than we had expected</a> (as a minimum, ECCL only way to access ECB buying, IMF involvement desired, both significantly lowering the probability that a country will apply for EFSF/ESM support)."</span></span></span></p>
<p><span><span>No country in Europe has asked for a bailout yet, <a href="http://www.businessinsider.com/the-next-five-days-are-critical-for-spain-2012-9">but Spain may be getting close.</a> Then, markets may see just how crucial Draghi's mistake back in August proves to be.</span></span></p>
<p><strong><a href="http://uk.reuters.com/article/2012/09/25/uk-ecb-draghi-plan-idUKBRE88O09820120925">Read the full story at Reuters &gt;</a></strong></p>
<h3><strong>Read Willem Buiter's take: <a href="http://www.businessinsider.com/buiter-eurozone-in-cardiac-arrest-for-at-least-2-3-more-years-2012-9">The Eurozone Will Be In 'Cardiac Arrest' For At Least 2-3 More Years &gt;</a></strong></h3><p><a href="http://www.businessinsider.com/mario-draghis-crucial-mistake-2012-9#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/die-welt-newspaper-bundesbank-headline-2012-9'FINANCIAL MARKETS CHEER THE DEATH OF THE BUNDESBANK'http://www.businessinsider.com/die-welt-newspaper-bundesbank-headline-2012-9
Thu, 06 Sep 2012 12:14:34 -0400Matthew Boesler
<p><img style="float:right;" src="http://static4.businessinsider.com/image/5048cb8969beddc417000011/die-welt-newspaper-headline.png" border="0" alt="Die Welt newspaper headline" /></p><p>That's the <a href="http://www.welt.de/finanzen/article109060047/Finanzmaerkte-bejubeln-den-Tod-der-Bundesbank.html">latest headline from the German newspaper Die Welt</a>&nbsp;(via <a class="hidden_link" href="http://www.businessinsider.com/blackboard/google">Google</a> Translate).</p>
<p>Mario Draghi said in the Q&amp;A today at the ECB meeting that "there was one dissenting view" on the bond-buying plan and he told the reporter who asked the question that "it's up to you to guess."</p>
<p>Sure enough, the German Bundesbank released a statement after Mario Draghi's press conference that said Buba president Jens Weidmann continues to stand opposed to the central bank buying sovereign bonds.</p>
<p>Die Welt's lede: "<span>ECB President Draghi breaks with brazen principles of German monetary policy.&nbsp;</span><span>The central bank is pumping unlimited money in the bond markets.&nbsp;</span><span>Stock markets cheer - for Germany, the nightmare begins."</span></p>
<p><strong><a href="http://www.welt.de/finanzen/article109060047/Finanzmaerkte-bejubeln-den-Tod-der-Bundesbank.html">Read the article at Die Welt &gt;</a></strong></p>
<h3><strong>ALSO:&nbsp;<a href="http://www.businessinsider.com/jpmorgan-ecb-engineer-a-debt-renegotation-2012-9">JPMorgan: The ECB May Have To Engineer A Massive Debt Renegotation And Take Huge Losses &gt;</a></strong></h3><p><a href="http://www.businessinsider.com/die-welt-newspaper-bundesbank-headline-2012-9#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bild-bundesbank-jens-weidmann-considered-resigning-2012-8BILD: German Central Bank Chief Weidmann Threatened To Resign Multiple Timeshttp://www.businessinsider.com/bild-bundesbank-jens-weidmann-considered-resigning-2012-8
Fri, 31 Aug 2012 04:37:00 -0400Paul Carrel
<p><img style="float:right;" src="http://static1.businessinsider.com/image/4fc4acb969bedd083d00001d-400-/jen-weidmann.jpg" border="0" alt="jen weidmann" width="400" /></p><p>* Buba declines comment on report Weidmann mulled quitting</p>
<p>* Draghi skipping Jackson Hole to broker deal on bond plan</p>
<p>* Asmussen wants IMF involvement as condition for bond buys</p>
<p>* Draghi must balance bond-buy caveats with need for impact</p>
<p>FRANKFURT, Aug 31 (<a href="http://www.businessinsider.com/blackboard/reuters" class="hidden_link">Reuters</a>) - German central bank chief Jens Weidmann's reported threat to resign has piled pressure on <a href="http://www.businessinsider.com/blackboard/european-central-bank" class="hidden_link">European Central Bank</a> President Mario Draghi to assuage his opposition to a new bond-buying plan without tying it up in so many knots it is rendered ineffective.</p>
<p>A Bundesbank spokesman declined to comment on Friday on a report in the mass circulation Bild newspaper that Weidmann, who has stressed his opposition to the strategy, had considered resigning several times in recent weeks but had been dissuaded by the German government.</p>
<p>Draghi is skipping this weekend's Jackson Hole policymakers' retreat to try to forge agreement. The Italian will have little time to celebrate his 65th birthday on Monday as he tries to seal a deal before a Sept. 6 ECB policy meeting.</p>
<p>The ECB is preparing to ease painful borrowing costs in Spain and Italy, in the teeth of Bundesbank opposition, to buy the euro zone governments time to negotiate legal and political hurdles to a longer-term response to the euro zone crisis.</p>
<p>"Opposition from Weidmann and reservations from some other Council members will mean that ECB bond purchases would be highly conditional, be focused on the short end and would not aim to bring yields down quite as much as Italy and Spain might like to see," said Berenberg economist Holger Schmieding.</p>
<p>Securing majority support for a plan Weidmann can live with represents the biggest balancing act Draghi has faced since he took over the ECB presidency on Nov. 1 last year.</p>
<p>He has already said any new ECB intervention will be conditional on the country affected first seeking help from the euro zone's rescue funds and agreeing to the austerity-centred reforms tied to such aid.</p>
<p>But go too far in trying to calm the Bundesbank and Draghi risks ending up with a dud of a plan that has no impact on markets. Not go far enough and he risks more Bundesbank sniping.</p>
<p>Draghi's allies are already talking tough.</p>
<p>ECB policymaker Joerg Asmussen said late on Thursday the ECB should only buy sovereign bonds if the International Monetary Fund is involved in setting the economic reform programmes that should be a condition for intervention.</p>
<p>The IMF is notorious for tying strict conditions to aid and Madrid is likely to take a dim view of that notion.</p>
<p>Spanish Prime Minister Mariano Rajoy has said he will not ask for any further help, to add to a bailout of Spanish banks worth up to 100 billion euros, until the ECB's strategy is clear.</p>
<p>But with Spain's important northeastern region of Catalonia calling for government help this week and recession deepening, some form of outside assistance is increasingly likely.</p>
<p>SIGNATURE PLAN</p>
<p>Draghi's July 26 vow to do "whatever it takes" to save the euro heralded his signature plan. He must now deliver to put his stamp on the ECB and seal its shift away from the Bundesbank's stability model to a more pragmatic institution.</p>
<p>"It needs to be credible in the eyes of the markets," one ECB source said of the new programme, adding that policymakers were aiming to have it ready for their meeting next Thursday.</p>
<p>The source, speaking on condition of anonymity, did not think the ECB would announce a target for bond yields, or aim for a specific spread - the premium other sovereigns' paper trades over the German benchmark.</p>
<p>Investors are ready to give the ECB some time to get on top of the crisis but any signs of a silver bullet being delayed beyond the bank's Oct. 4 meeting will have fingers hovering over the "sell" button on stocks, bonds and the euro.</p>
<p>Markets soon found the ECB had little appetite to spend more than 20 billion euros a week on its existing bond-buy programme, the now mothballed Securities Markets Programme (SMP), when it extended that plan to buy Spanish and Italian debt a year ago.</p>
<p>The SMP, launched in May 2010, was hobbled from the outset by the Bundesbank's then president, Axel Weber, voicing his deep misgivings over the programme just as soon as it was born.</p>
<p>Weber quit over the SMP in 2011. Weidmann indicated to Der Spiegel magazine at the weekend he planned to stay at his post.</p>
<p>"I can do my task best if I stay in office. I want to work to ensure that the euro is just as hard as the mark was," Weidmann told Der Spiegel in an interview released on Sunday.</p>
<p>CONDITIONALITY QUESTION</p>
<p>The Bild report and Weidmann's opposition to the new round of bond buying, which he says could be "addictive like a drug", mean Draghi must attach strings to the plan to keep pressure on governments to reform and tighten their budgets.</p>
<p>ECB policymakers, led by Weidmann, are fretting about the effectiveness of such conditionality. The problem is that for governments faced with austerity and economic contraction, it pays to renege on any deal once the ECB's actions are in place.</p>
<p>The ECB was hurt by its experience last year of buying Italian and Spanish bonds, only for Italy's then-prime minister, Silvio Berlusconi, to go back on reform promises he had made to get the ECB to step in just days after he made the commitments.</p>
<p>Once the new bond-buying plan is born, Weidmann will likely not be involved in running it day-to-day. The tactics of how to use the SMP were decided on a daily basis by the ECB's six-member Executive Board, on which Weidmann does not sit.</p>
<p>Weber's misgivings nonetheless show the Bundesbank can undermine ECB policies, and some worry Weidmann could do this.</p>
<p>"My fear is that his own decision will stand on principle, but that by being so outspoken beforehand, he hopes to limit the extent of the operation," the ECB source said. "That would constantly put a question mark over how far we could go."</p>
<p>Weidmann does not have enough allies within the ECB to block the plan, sources say, though in a weekend interview with Germany's Der Spiegel magazine, which ran a headline 'Rebellion of the Bundesbank' on its front page, the German central bank chief said: "I hardly believe that I am the only one to get stomach ache over this."</p>
<p><img class="nc_pixel" src="http://pixel.newscred.com/px.gif?key=YXJ0aWNsZT1jNGM2YTE2ZmMxNjUwMTUzYmE4NzFkZTEwMTg1ODhiNyZvd25lcj1lMjI0N2Q1MGI3OThiNGFmYmY4ZWMwMzI0YmY4MDI1YSZub25jZT02MjNlNTY0Yy04ZmJhLTQ4MjItYTU1Yy0wMzYzNjAxZjlkM2YmcHVibGlzaGVyPThjMDBmYmVlNjFkNWJjZjBjNjA5MmQ4YjkyZWJiY2Ex" border="0" alt="" width="1" height="1" /></p><p><a href="http://www.businessinsider.com/bild-bundesbank-jens-weidmann-considered-resigning-2012-8#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/the-bundesbank-is-really-starting-to-annoy-angela-merkel-and-the-german-government-2012-8The Bundesbank Is Really Starting To Annoy Angela Merkel And The German Governmenthttp://www.businessinsider.com/the-bundesbank-is-really-starting-to-annoy-angela-merkel-and-the-german-government-2012-8
Mon, 27 Aug 2012 08:45:22 -0400Matthew Boesler
<p><img style="float:right;" src="http://static6.businessinsider.com/image/4fc4acb969bedd083d00001d-400-300/jen-weidmann.jpg" border="0" alt="jen weidmann" width="400" height="300" /></p><p>Bundesbank president Jens Weidmann is really starting to lose friends over his stance on ECB policy. He's long been opposed to the central bank buying government bonds on the open market, which in the last few days has become the action plan of choice among commentators, analysts, <a href="http://www.businessinsider.com/report-new-details-emerge-on-the-ecbs-plan-to-save-spain-and-italy-2012-8">and reportedly the ECB itself</a>.</p>
<p>Over the weekend, German chancellor <a class="hidden_link" href="http://www.businessinsider.com/blackboard/angela-merkel">Angela Merkel</a> said publicly,&nbsp;&ldquo;I support Jens Weidmann, and that as the head of the German Bundesbank he has much influence as possible in the ECB.&rdquo;</p>
<p>However, the German news magazine Der Spiegel reports today that behind the scenes,&nbsp;<a href="http://www.spiegel.de/international/europe/german-bundesbank-opposes-euro-crisis-strategy-a-852237.html">even Merkel and her cabinet are getting tired of Weidmann's obstruction of ECB plans</a> to stabilize peripheral countries' bond markets.</p>
<p>Der Spiegel:</p>
<p style="padding-left: 30px;">Members of Merkel's and Sch&auml;uble's staffs appear to accept Weidmann's notorious opposition to Draghi with a shrug. At the Chancellery, where the young Bundesbank president used to work, there has even been malicious talk of "fundamentalists." In the Finance Ministry, too, Weidmann is increasingly regarded as a troublemaker. "Some people interpret the ECB's mandate more narrowly. Others interpret it a bit more broadly," says a senior Finance Ministry official, with a trace of fatalism in his voice.</p>
<p style="padding-left: 30px;">Privately, Chancellor Merkel also has little sympathy for the intransigence of her former adviser. Merkel apparently feels that Weidmann and his staff shouldn't be making such a fuss.</p>
<p>Weidmann, who before taking his post at the head of the Bundesbank was an economic adviser to Merkel, has apparently taken his former boss by surprise since being appointed to the German central bank:</p>
<p style="padding-left: 30px;">Given his nature and reputation, observers were convinced that Weidmann would prove to be even more flexible in his new position than his predecessors. Previous Bundesbank chief Axel Weber, for example, had resigned over his opposition to bond purchases, and ECB chief economist J&uuml;rgen Stark followed suit shortly after Weidmann came into office.</p>
<p style="padding-left: 30px;">It was all the more surprising that the new Bundesbank president was soon openly championing Germany's positions even more staunchly than his predecessors. Whereas Weber and Stark tended to keep their criticism to themselves, Weidmann, in speeches, op-ed pieces and interviews, warned of the dangers of a misguided euro crisis policy.</p>
<p>In other words, Weidmann is living up to tradition a bit more than expectations.</p>
<p><strong><a href="http://www.spiegel.de/international/europe/german-bundesbank-opposes-euro-crisis-strategy-a-852237.html">Read the full article at Der Spiegel &gt;</a></strong></p>
<h3><a href="http://www.businessinsider.com/report-germany-greece-exit-the-euro-temporarily-2012-8"><strong><span>REPORT: Germany May Ask Greece To Exit The Euro 'Temporarily' &gt;</span></strong></a></h3><p><a href="http://www.businessinsider.com/the-bundesbank-is-really-starting-to-annoy-angela-merkel-and-the-german-government-2012-8#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/merkel-everyone-needs-to-watch-what-they-say-about-greece-2012-8MERKEL: Everyone Needs To Watch What They Say About Greecehttp://www.businessinsider.com/merkel-everyone-needs-to-watch-what-they-say-about-greece-2012-8
Sun, 26 Aug 2012 13:46:24 -0400Noah Barkin
<p><img style="float:right;" src="http://static2.businessinsider.com/image/4fc4acb969bedd083d00001d-401-301/jen-weidmann.jpg" border="0" alt="jen weidmann" width="401" height="301" /></p><p>BERLIN (<a class="hidden_link" href="http://www.businessinsider.com/blackboard/reuters">Reuters</a>) - German Chancellor <a class="hidden_link" href="http://www.businessinsider.com/blackboard/angela-merkel">Angela Merkel</a> voiced support for Bundesbank chief Jens Weidmann on Sunday, saying she welcomed his warnings about the handling of the euro zone debt crisis and saw his influence within the <a class="hidden_link" href="http://www.businessinsider.com/blackboard/european-central-bank">European Central Bank</a> as positive.</p>
<p>In an interview with public broadcaster ARD, Merkel also cautioned politicians in her coalition against talking up the possibility of a Greek exit from the euro zone, urging them to weigh their words "very carefully".</p>
<p>Weidmann, a former adviser to Merkel, reiterated his opposition to ECB President Mario Draghi's plans to buy the bonds of stricken euro members Italy and Spain in a weekend interview with German magazine Der Spiegel.</p>
<p>Contrary to Weidmann, Merkel said she was confident that the ECB was acting within its mandate for price stability, but she said it was good that the Bundesbank chief was speaking up.</p>
<p>"I think it is good that Jens Weidmann warns the politicians again and again," Merkel said. "I support Jens Weidmann, and believe it is a good thing that he, as the head of the German Bundesbank, has much influence in the ECB."</p>
<p>Merkel allies, particularly the Bavarian Christian Social Union (CSU), have stepped up criticism of Greece in recent weeks, with senior CSU lawmaker Alexander Dobrindt saying at the weekend that he expected Athens to be out of the euro zone next year.</p>
<p>Last week, Greek Prime Minister Antonis Samaras visited Merkel in Berlin and issued an impassioned plea for German politicians to tone down their rhetoric, saying it was making it impossible for Greece to win back confidence and launch its privatizations drive.</p>
<p>Merkel said she believed Samaras was making a serious attempt to turn Greece around and issued a similar warning to her fellow politicians in Germany, saying Europe was in a "very decisive phase" in its three-year old crisis.</p>
<p>"My plea is that everyone weigh their words very carefully," she said.</p>
<p>Asked about speculation that the International Monetary Fund (IMF) might be tempted to pull out of the Greek rescue program, Merkel said she had "no indications" that this was the case.</p>
<p>(Reporting by Noah Barkin, editing by Gareth Jones)</p>
<p><img class="nc_pixel" src="http://pixel.newscred.com/px.gif?key=YXJ0aWNsZT0zNjE0N2ZiOTQ0MzhkNWVjZThkNzQ5NTBjOWY0OTMzMiZvd25lcj1lMjI0N2Q1MGI3OThiNGFmYmY4ZWMwMzI0YmY4MDI1YSZub25jZT1lMmFjYzExMS04MmNjLTRkNmYtYmI2YS0yMzNjYThmODNkN2UmcHVibGlzaGVyPThjMDBmYmVlNjFkNWJjZjBjNjA5MmQ4YjkyZWJiY2Ex" border="0" alt="" width="1" height="1" /></p><p><a href="http://www.businessinsider.com/merkel-everyone-needs-to-watch-what-they-say-about-greece-2012-8#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bundesbank-qe-1975-2012-8How The German Bundesbank Flouted Its Own Rules And Did QEhttp://www.businessinsider.com/bundesbank-qe-1975-2012-8
Tue, 07 Aug 2012 13:05:42 -0400Max Nisen
<p><img style="float:right;" src="http://static1.businessinsider.com/image/5021438769beddaf2e000015/bundesbank.png" border="0" alt="Bundesbank" /></p><p>Bundesbank President Jens Weidmann has been one of the <a href="http://www.businessinsider.com/report-7-ecb-members-opposed-bond-purchase-program-2012-8">most outspoken critics</a> of <a class="hidden_link" href="http://www.businessinsider.com/blackboard/european-central-bank">European Central Bank</a> President Mario Draghi's plan to buy sovereign bonds, a form of quantitative easing.</p>
<p>Ironically, the Bundesbank itself side-stepped its mandate to buy public bonds on the open market back in 1975.</p>
<p>A note from <a class="hidden_link" href="http://www.businessinsider.com/blackboard/bnp-paribas">BNP Paribas</a> analyst Evelyn Herrmann describes how it came to pass.</p>
<p>Facing collapsing demand for longer-dated bonds and deteriorating economic growth, the Bundesbank purchased 7.6 billion Deutsche marks of public post, telecom, and sovereign bonds on the secondary market. That was equivalent to about 1 percent of GDP.&nbsp;</p>
<p>Monetization of debt was forbidden in the Bundesbank's mandate. However, after Bundesbank President Karl Klasen "accidentally" announced bond purchases at a press conference, they were forced to go through with it.</p>
<p>According to the note, then Chief Economist of the Bundesbank Helmut Schlesinger justified the bond purchases by citing the Bundesbank's inability to use other tools effectively:</p>
<p style="padding-left: 30px;"><em>....&ldquo;we can only operate open market policy in order to regulate the money market, but not to finance the public deficit&rdquo;. In other words, the Bundesbank needed to purchase bonds in order to maintain monetary policy&rsquo;s transmission channel. The Bundesbank had set a monetary growth target for the year for the first time, which it risked missing (money growth slowed to 5.7% in May 1975, below the target for the year of 8%).</em></p>
<p>Debt monetization is also prohibited by the EU treaties, however the ECB has gotten around this law in the past by "sterilizing" its bond purchases&mdash;essentially, fighting the inflationary nature of QE by taking away liquidity from elsewhere in the market.</p>
<p>Though the situation of the Euro is obviously different than Germany's in 1975, Mario Draghi also made an argument about monetary policy transmission in his efforts to justify open market operations.&nbsp;From <a href="http://www.businessinsider.com/live-draghi-post-decision-ecb-press-conference-2012-8">his August 2nd statement</a>:&nbsp;</p>
<p style="padding-left: 30px;"><em>"Exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy."</em></p>
<p>If the Bundesbank's behavior is any indication, then there might be room for Draghi to side-step treaty laws and do full-fledged, expansionary QE&mdash;purchases of sovereign bonds without removing money from elsewhere in the market. This would devalue the euro (a positive for Spain and Italy), and so do more than just keep borrowing costs for peripheral governments down.</p>
<p>Even if not, Draghi might use this 1975 example as ammunition in his negotiations with the stubborn Bundesbank.</p>
<h3><strong>NOW READ:&nbsp;<a href="http://www.businessinsider.com/draghi-just-staged-a-dramatic-power-play-2012-8">Draghi Just Staged A Dramatic Power-Play That Could Change Everything In Europe</a>&nbsp;&gt;</strong></h3><p><a href="http://www.businessinsider.com/bundesbank-qe-1975-2012-8#comments">Join the conversation about this story &#187;</a></p> http://www.businessinsider.com/bundesbank-president-weidmann-tears-apart-critics-in-a-new-interview-2012-8Bundesbank President Weidmann Tears Apart Critics In A New Interviewhttp://www.businessinsider.com/bundesbank-president-weidmann-tears-apart-critics-in-a-new-interview-2012-8
Wed, 01 Aug 2012 08:47:50 -0400Matthew Boesler
<p><img style="float:right;" src="http://static6.businessinsider.com/image/4fc4acb969bedd083d00001d-400-300/jen-weidmann.jpg" border="0" alt="jen weidmann" width="400" height="300" /></p><p>We <a href="http://www.businessinsider.com/draghi-weidmann-talks-ecb-2012-7">covered the impending showdown</a> between the German central bank president and Mario Draghi, head of the ECB, over controversial measures to support ailing eurozone countries by buying their sovereign bonds.</p>
<p>The German Bundesbank <a href="http://www.bundesbank.de/Redaktion/EN/Standardartikel/Press/Interviews/2012_07_27_weidmann_bundesbankmagazin.html">just posted an interview</a> from an internal staff magazine with the central bank's chief, Jens Weidmann, on their website.</p>
<p>Weidmann does not sound like he's coming around to see Draghi's point of view.</p>
<p>In the interview, Weidmann plainly states that "the central bank must use and maintain this protection [from political influence]. Furthermore, it should be aware that this independence also requires it to respect and not overstep its own mandate." He also said that <strong>no one should expect the ECB to be able to help promote growth, reduce unemployment, or stabilize Europe's struggling banks,</strong> because it's just not part of the ECB mandate.</p>
<p>The interviewer asked Weidmann if he thought it was harder these days for the Bundesbank to assert its influence given that it's only one of 17 member central banks in the ECB. <strong>Weidmann rejected the notion that the Bundesbank was less influential as part of the ECB pretty quickly:</strong></p>
<p style="padding-left: 30px;"><span>Even though what you say is correct in terms of shares of voting rights, I certainly would not say that we are &ldquo;just&rdquo; one of 17 central banks. <strong>We are the largest and most important central bank in the Eurosystem and we have a greater say than many other central banks in the Eurosystem.</strong> This means that we have a different role. We are the central bank that is most active in the public debate on the future of monetary union. This is also how some of my colleagues expect it to be.</span></p>
<p><span>Next, Weidmann turned to the matter of economists and commentators who advocate inflationary policy from the ECB to weaken Germany's competitiveness vis-a-vis peripheral nations, <strong>calling the idea "almost absurd" and saying that "Germany does not have to accept inflation rates which broadly unmoor inflation expectations</strong> merely to ensure that the average euro-area inflation rate remains just below two per cent."</span></p>
<p><span>The last criticism Weidmann addressed was that Germany has benefitted so much from the monetary union that they have an obligation to help their neighbors in peripheral countries, calling that argument "incorrect," saying that <strong>"</strong></span><strong>Germany is already providing large&shy; scale assistance for the peripheral countries, not least as an anchor of stability and as a guarantor of the rescue packages."</strong></p>
<p>The markets are anxiously awaiting the ECB's next meeting on Thursday &ndash; if their reaction to <a href="http://www.businessinsider.com/this-is-why-everyone-is-wary-of-the-ecb-report-2012-7">Draghi's comments last week</a> that the ECB would do "whatever it takes" to save the euro, they're definitely hoping Mario Draghi wins out over Weidmann in the debate.</p>
<h2><a href="http://www.businessinsider.com/morgan-stanley-economic-outlook-europe-2012-7#germany-wont-be-able-to-escape-the-recession-either-2">Either way, Morgan Stanley doesn't see Germany escaping recession this year &gt;</a></h2><p><a href="http://www.businessinsider.com/bundesbank-president-weidmann-tears-apart-critics-in-a-new-interview-2012-8#comments">Join the conversation about this story &#187;</a></p>